HomeEconomyPakistan EconomyPakistan Economic Crisis: Tax hikes may surge inflation, check food prices here

Pakistan Economic Crisis: Tax hikes may surge inflation, check food prices here

Pakistan has been dealing with a major economic crisis as its foreign exchange reserves have been depleted. According to The Associated Press, Pakistan’s inflation is anticipated to rise as the administration imposes additional levies worth 170 billion rupees this month in a push for a hefty bailout.

This comes after the International Monetary Fund postponed the payment of a critical $1.1 billion tranche of a $6 billion 2019 contract, which had been held up since December due to Pakistan’s inability to follow the criteria. The latest round of discussions between Pakistan and the IMF ended on Friday, with the institution advocating moves such as the imposition of additional tariffs.

Ehtisham-ul-Haq, a veteran economist, said, “The imposition of more taxes means tough days are ahead for the majority of the people in Pakistan, who are already facing higher food and energy costs, but there is no other way out if Pakistan needs the IMF loans, and Pakistan desperately needs them.”

In Pakistan, inflation has reached a 48-year high. Foreign cash reserves are insufficient to support a month’s worth of imports. In January 2023, the Consumer Price Index climbed by 27.6%. During the same time period, the wholesale price index climbed by 28.5%.

Pakistan economic crisis: price of essential items

CommoditiesPrice/Kilograms
Wheat (Atta)120
Rice Superior240
Moong155-172
Sugar of market90
Chicken780
Milk110-160
Edible Oil480-490
Lemon100
Apple110-320
Desi Ghee1800-2500
Mutton1100
Curd115
Green tea1100
Tomato40-60

 

Meanwhile, Pakistan is still dealing with the aftermath of record-breaking floods that killed 1,739 people and ruined 2 million dwellings in the summer of 2022.

Hundreds of nations and international institutions offered more than $9 billion in aid to Pakistan in January during a United Nations-backed meeting in Geneva, but economists and Pakistani officials insist the monies would be used for projects rather than cash.

Since then, Pakistani Finance Minister Ishaq Dar has stated that his specialists are ready to levy higher taxes and reduce subsidies on energy, gas, and other commodities in order to satisfy the requirements of the agreement.

According to officials, numerous friendly nations, including China, Saudi Arabia, and the United Arab Emirates, have told Sharif’s administration that they will provide financial assistance to Islamabad, but they also want Pakistan to complete the 2019 IMF programme.

Imran Khan, Sharif’s predecessor who was ousted in an April no-confidence vote in Parliament, has warned that Pakistan might face a Sri Lanka-like situation due to the country’s increasing economic problems. He has openly warned that if Pakistan fails in the near future, the international community may blackmail the country over its nuclear programme.

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